Oregon gets ‘Homeowners Bill of Rights’

The governor of Oregon has signed into law a bill called the Homeowners Bill of Rights in an effort to protect homeowners in the state from certain insurance company practices.

Gov. Theodore Kulongoski last week signed into law Senate Bill 118, which passed both chambers of the Oregon Legislature without opposition and will take effect in January 2006.

“Homeowners deserve fair treatment from their insurance companies,” said Cory Streisinger, director of the Oregon Dept. of Consumer & Business Services. “This bill sets reasonable standards and limitations for insurer practices that have become too common in recent years, and gives consumers an opportunity to correct errors that could cost them money or even prevent them from buying a home.”

SB 118 requires insurers to disclose to consumers whether the insurer uses loss-history databases (similar to credit histories) in homeowner insurance underwriting. If the insurer uses these databases, it must explain how the database is being used, how the consumer can get a free copy of his or her own loss history, and how to correct inaccurate data.

The bill also gives consumers the following protections:

Prohibits insurers from canceling or not renewing policies for the first claim in a five-year period, which protects consumers from losing their insurance for filing a claim. Insurers may surcharge for first claims but those surcharges must be filed with the Insurance Division to ensure that actuarial evidence confirms them to be fair and justified;

Prohibits insurers from using claims made under prior ownership to cancel or nonrenew policies or increase rates when the cause of the past claims is shown to be mitigated;

Prohibits insurers from treating inquiries by policyholders as claims, thus protecting consumers’ right to seek information from their insurer and decide whether to file claims;

Limits to five years the period at which insurance companies can “look back” on consumers’ claims histories;

Restricts mid-term policy cancellations by the insurer to policyholder fraud, misrepresentation, nonpayment, violation of terms or conditions, and substantial increases in risk of loss after insurance coverage has been issued;

The Department of Consumer & Business Services drafted SB 118 in response to complaints from Oregonians with homeowner insurance policies about unfair treatment by insurance companies.

“We analyzed complaints, listened to input at public forums, researched best practices in the industry, and drafted Senate Bill 118 for the legislature’s consideration,” DCBS Insurance Division Administrator Joel Ario said. “It is a credit to all concerned that we ended up with a strong consumer-protection bill that that had broad support from the insurance and real estate industries as well as consumer advocacy groups.”

The Division said it received hundreds of consumer complaints regarding insurance company practices from 2000 to 2004. Complaints were primarily about insurers’ expanded use of loss-history databases, claim inquiries being treated as actual claims, and unlimited lookback periods for prior claims.

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